December 28, 2016 / 10:35 AM / 8 months ago

EMERGING MARKETS-Emerging stocks at six-day highs, yuan worries linger

LONDON, Dec 28 (Reuters) - Global equity gains and stronger commodity prices lifted emerging stocks 0.7 percent on Wednesday, though worries about China weighed, with offshore yuan overnight rates hitting three-month highs.

Data showing steadily rising U.S. house prices and consumer confidence at its highest in more than 15 years underscored the strength of the economic recovery, boosting equity markets and allowing MSCI's emerging stocks to rise to six-day highs.

However, emerging markets face headwinds from a stronger dollar and U.S. yields at one-week highs. Asian currencies touched multi-month lows, also feeling the heat from the yuan which has lost 6.6 percent against the dollar this year and is trading near 8-1/2 year highs.

Traders expect depreciation pressures on the Chinese currency to extend into January when individuals get a fresh $50,000 foreign-exchange conversion quota.

Authorities' efforts to check outflows via tighter liquidity saw Hong Kong's overnight yuan borrowing rate jump to its highest level in more than three months.

"All eyes are on yuan weakness, although all currencies are wilting against the vicious dollar rally at the moment," TD Securities said in a note.

Jitters about emerging markets fuelled outflows of $3.35 billion from dedicated EM equity funds, excluding China A-share funds, in the week ended December 21, the second largest outflow week in 2016.

But global equity gains and signs of perkier growth have lifted commodities, with copper, widely used in power and construction, up around 20 percent this year on the Shanghai exchange and on track for its largest annual rise since 2010. Iron ore on the Dalian exchange is up 170 percent.

That is likely to benefit commodity producing emerging markets such as Russia, Brazil and South Africa in 2017.

"Our portfolios retain a strong commodities/oil bias throughout, to benefit from the current price stabilisation, improved outlook and the prospect of a Trump-induced infrastructure boost next year," JPMorgan Asset Management's head of emerging debt, Pierre-Yves Bareau, told clients.

In eastern Europe the Romanian leu slipped 0.22 percent to approach six-month lows against the euro after President Klaus Iohannis rejected the Social Democrat Party's nominee for prime minister.

Two weeks after an election, Romania remains without a government and is facing the risk of a serious political crisis.

The Ukrainian hyvnia fell sharply for a second day, staying close to 3-1/2-month lows to the dollar. The central bank attributed the volatility to end-month debt repayments and said it would sell $100 million to support the currency.

For GRAPHIC on emerging market FX performance 2016, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2016, see tmsnrt.rs/2dZbdP5

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley Emrg Mkt Indx 850.00 +5.34 +0.63 +7.03

Czech Rep 920.90 +0.55 +0.06 -3.70

Poland 1942.30 +5.58 +0.29 +4.47

Hungary 31912.40 +43.89 +0.14 +33.41

Romania 7014.56 -6.04 -0.09 +0.15

Greece 635.79 -0.40 -0.06 +0.70

Russia 1143.24 +7.45 +0.66 +51.01

South Africa 43765.82 +905.32 +2.11 -4.44

Turkey 77417.20 +717.78 +0.94 +7.93

China 3102.54 -12.12 -0.39 -12.34

India 26201.99 -11.45 -0.04 +0.32

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2016

Czech Rep 27.02 27.02 -0.01 -0.08

Poland 4.40 4.40 -0.20 -3.32

Hungary 309.00 308.10 -0.29 +1.83

Romania 4.54 4.53 -0.19 -0.39

Serbia 123.02 123.20 +0.15 -1.26

Russia 60.60 60.58 -0.03 +20.39

Kazakhstan 332.30 333.96 +0.50 +2.47

Ukraine 26.85 26.60 -0.93 -10.79

South Africa 13.90 13.92 +0.15 +11.24

Kenya 102.28 102.30 +0.02 -0.08

Israel 3.85 3.84 -0.36 +0.97

Turkey 3.54 3.52 -0.53 -17.59

China 6.96 6.95 -0.12 -6.69

India 68.18 67.97 -0.32 -2.91

Brazil 3.27 3.27 +0.00 +21.09

Mexico 20.77 20.74 -0.15 -17.35

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 359 1 .00 7 36.70 1

All data taken from Reuters at 10:07 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.

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